Morgan Stanley Asia Pacific Summit - Hindustan Unilever · Morgan Stanley Asia Pacific Summit...

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Morgan Stanley Asia Pacific Summit November , 2004

Morgan Stanley Asia Pacific SummitMorgan Stanley Asia Pacific Summit

Singapore, November 2004Singapore, November 2004


Current Market ContextCurrent Market Context

ContentsContents

OverviewOverview

Growth AgendaGrowth Agenda

The India OpportunityThe India Opportunity

Strategy RecapStrategy Recap

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OverviewOverview





• 36,300 employees

• 1,350 managers

• 2,000+ suppliers & associates

• 80 company factories

• 45 C&FAs

• 7,000 Stockists

• Direct Coverage - 1 Mn outlets

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HLL - India’s Largest FMCG CompanyHLL - India’s Largest FMCG Company

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Financial OverviewFinancial Overview

* Figures based on FY2003 Audited Results

Turnover 2,190

Operating Profit 470

Net Profit (bei) 390

EPS 20c

Market Capitalisation 6,080

$ Mn

Operating Margin % 21.3%

EVA 310

Surplus Cash Generated 380

Personal Products

23%

Beverages12%

Foods6%

Ice Creams1%

Exports12%

Others4% Soaps &

Detergents43%


HLL - India’s Largest FMCG Company HLL - India’s Largest FMCG Company

100

23 2315 12 10 9 8 8 7 5 4

HLL Nestle Nirma Britannia Dabur(FMCG)

Colgate Marico GSK Tata Tea P&G

GCPL Gillette

Trailing 4 Quarters SalesTrailing 4 Quarters Sales

Index : HLL’s Sales = 100Index : HLL’s Sales = 100

*

*Estimated

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CategoryHLL -

MarketShare (%)

Fabric Wash 38Personal Wash 56

Packet Tea 29

Skin 60Hair Wash 49Talcum Powder 60

Dishwash 58

Jams 79

Market Leader

#2Market

Share (%)

1710

19

71914

11

5

Source : A.C,Neilson ORG Marg

Leadership across categoriesLeadership across categories

Toothpaste 33Instant Coffee 41Ketchups 31

Strong No. 2475941

HLL -Market

Share (%)

#1Market

Share (%)


HLL Equity Capital - 48 Mn $

HLL Shareholding PatternHLL Shareholding Pattern

As on 29th Oct’04

FIIs13.0%

Individuals20.4%

Domestic FIs15.0%

Unilever51.6%

Market Capitalisation - 6,080 Mn $

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OverviewOverview





HLL : 2000 - 03HLL : 2000 - 03Three Pronged Strategy

“Profitable Growth Through Focus”

Grow through focus on “POWER BRANDS”

Improve profitability of Foods

Secure future of Non - Core businesses

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35 35 PowerfulPowerfulBrandsBrands

2000 2004

110 Brands110 Brands

Across Categories &Income Segments

Profitable growth through focusProfitable growth through focus

2003 FMCG Market Power Brands

Growth% -5.8% 6.9%

Powerful Brands


Growth through Brand FocusGrowth through Brand Focus

• Concentrate resources & brand support on tight

portfolio of

•Leading Brands (#1, #2 or dominate niche)

•Covering key benefits & price positions in Category

•Strongly differentiated

•Merge overlapping brands within category

•De-list/Divest/Milk small & unviable brands

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2000 2003

1300 BpsImprovement

Foods Gross Margins %

Profitable growth through FocusProfitable growth through FocusImproving Foods Profitability


NonCore

BusinessAFS

Quest

Nickel Catalyst

Adhesives

Seeds

Diversey Lever

DIVESTED TRANSFER

Leather

Mushrooms

Transferred to subsidiary forpotential JV / disposal

Oils & Fats

Profitable growth through focusProfitable growth through focusFocus on FMCG

•Focused Portfolio: Non FMCG down from 24% to 8%•Sales of Divested Businesses : 14% of ‘03 Turnover•Value delivered in divestment 82 Mn $

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Economic Value Added

190

230270

310

2000 2001 2002 2003

$ Mn

Profitable growth through FocusProfitable growth through Focus

EPS

2003

DPS

CAGR = 16%

2000 20032000

CAGR = 11%

Rewarding Shareholders



OverviewOverview




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Economic OutlookEconomic Outlook

Positives• Strong GDP Growth• High Forex Reserves• Growing Exports• Focus on Rural & Infrastructure

Growth%

* CMIE Estimates

2001-02 2002-03 2003-04 (AE)* 2004-05 (E)*

Agriculture 6.5 (5.2) 9.1 0.8

Industry 3.3 6.2 6.7 6.4

Services 6.8 7.1 8.7 8.0

GDP 5.8 4.0 8.2 6.0

Concerns• Oil Prices• Inflation• Fiscal Deficit• Agricultural Growth



• More than 1 Billion Consumers

• Growing Disposable Income

• Young Population: 45% less than 20 years*

• Growing aspirations fuelled by media

• Low levels of

•Penetration

•Per Capita Consumption

* Source : Statistical Outline of India (2002-03)

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Opportunity to Drive PenetrationOpportunity to Drive Penetration

CategoryUrban

Penetration (%)

Rural Penetration

(%)

Total Penetration

(%)

Toothpaste 69.8 32.3 43.5

Skin 36.6 19.8 24.7

Hair Wash 40.1 16.3 23.3

Talcum Powder 66.0 36.8 45.1

Dishwash 54.6 11.5 24.4

Ketchup 12.5 0.7 4.2

Source : Indian Readership Survey 2002


Per Capita Consumption (US $ )

Fabric Wash Toothpastes Shampoos

China 1.7 0.8 1.1

Indonesia 2.0 1.1 1.2

India 1.2 0.4 0.6

Source : Euromonitor

Opportunity to grow consumptionOpportunity to grow consumption

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Per Capita Income (US$ / Annum)

* Source : Euromonitor

** Source : BRICs Report - Goldman Sachs

556 *

1020 *1015**

India - 2003 China - 2003India - 2013

Growth in Disposable IncomeGrowth in Disposable Income


Growing ProsperityGrowing Prosperity

HH Income Class

Income Range per

HH (US$ p.a)

Very Rich >4,675

Consuming Class 975-4675

Climbers 475-975

Aspirants 350-475Destitutes <350

2003 2013

24

33

74

46

3

DestitutesDestitutes

AspirantsAspirants

ClimbersClimbers

ConsumingConsuming

ClassClass

Very RichVery Rich

8

9

79

124

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Nos Nos Indicate Indicate Mn Mn HouseholdsHouseholds

Total181 231

Source : NCAER; HLL Research

Consuming Class Households to Treble

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FMCG Market Size $Bn

11.6*

27.8 *

India - 2003 India - 2013

* Source HH Panel Data** Estimated based on China’s current per capita consumption

FMCG - OpportunityFMCG - Opportunity

Market will increase at 9% p.a; constant money



OverviewOverview




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• Recent stagnation due to discontinuities

– Choice explosion (Durables, Services, Entertainment)

– Interest rate reduction (Easy Credit)

• Price Led Local Competition

• International companies seeking market position

• Driving Penetration & Consumption

Current Market ContextCurrent Market ContextChallenges


••Drive growth agendaDrive growth agenda

••Take competitive challenges head onTake competitive challenges head on

•• Financial commitment for long term valueFinancial commitment for long term value

MQ 2004MQ 2004Decisive Steps

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• Pricing

–– Laundry : Price ReductionLaundry : Price Reduction

–– Shampoos: Value Improvement & Lower Price PointsShampoos: Value Improvement & Lower Price Points

–– Toothpaste: Value Corrections & SKU rationalizationToothpaste: Value Corrections & SKU rationalization

• Investments behind brands

–– InnovationsInnovations

–– QualityQuality

–– Higher A&PHigher A&P

Current Market ContextCurrent Market ContextActions


Current Market ContextCurrent Market ContextPricing actions

Price Index 2003 =100 2003 SQ 04

Dove 100 74

Surf Excel 100 74

Surf Excel Blue 100 80

Clinic Plus 100 79

Sunsilk 100 84

Driving Affordability

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Current Market ContextCurrent Market ContextInnovations in 2004

MQ

’04

MQ

’04

JQ’0

4JQ

’04

SQ’0

4SQ

’04


Current Market ContextCurrent Market ContextStep up in HPC A&P Spends

100

134

A&P Spends HPC (JQ+SQ)

2003

A&P SpendsHPC (JQ+SQ)

2004

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Volume Value

Personal Wash

Laundry

Skin

Shampoos

Toothpaste

Dishwash

SQ 2004HPC Topline Performance

Color Cosmetics

==

Volume ValueJQ’04 SQ’04

HPC

==

==


Current Market ContextCurrent Market ContextHPC

-0.5

2.7

4.8

5.9

JQ'04 SQ'04

Sales Growth% Volume Growth

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Current Market ContextCurrent Market ContextFabric Wash

Actions taken

•Price reduction

•Additional investment

in quality

•Higher A & P spends

•Brand repositioning -2.5

-0.9

-4.8

2.9

FY'03 MQ'04 JQ'04

SQ'04

-0.4

4.75.9

9.2

FY'03

MQ'04 JQ'04 SQ'04

Volume Growth%Volume Growth%

Value Growth%Value Growth%



Actions taken

•Price reduction

•Additional investment

in quality


•Brand repositioning

Washing PowdersWashing Powders 29.429.6

29.4

29.3

28.5

28.9

27.727.7

28.1

27.8

Exit 03 Jan'04 Feb'04 Mar'04 Apr'04 May'04 Jun'04 Jul'04 Aug-04 Sep-04

LaundryLaundry 25.9

25.3

25.2

25.4

25.0

25.6

24.824.7

25.125.0


Volume SharesVolume SharesFabric Wash

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Current Market ContextCurrent Market ContextShampoo

Actions taken •Price reduction - bottles

•Value Improvement - Sachets

•Innovations

•Sunsilk

•Clinic Plus

•CAC


21.5

1.6

42.5 42.9

FY'03 MQ'04 JQ'04 SQ'04

Volume Volume Growth%Growth%

52.5

51.6

51.249.8

49.0

49.448.9

48.5

49.3

48.7


Volume Volume SharesShares


••Continuing sales flatContinuing sales flat

••HPCHPC–– HPC grows 6% in Volumes; growth across categoriesHPC grows 6% in Volumes; growth across categories–– Volume growth momentumVolume growth momentum–– Pricing actions lead to 2% value growthPricing actions lead to 2% value growth–– Volume market shares gains in Laundry and ShampooVolume market shares gains in Laundry and Shampoo

••FoodsFoods–– BrookeBond BrookeBond and Instant Coffee grow welland Instant Coffee grow well–– Decline by 7% impacted largely due to plannedDecline by 7% impacted largely due to planned

discontinuation; stock reduction and one-discontinuation; stock reduction and one-offsoffs

Current Market ContextCurrent Market ContextCum 2004 Highlights

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•Operating Profits (PBIT) declines 27%

•Pricing actions in Laundry & Shampoos

•Higher A&P Spends

•Exceptional Items

• EBIT margins improve by 100 bps in SQ’04 over JQ’04

Current Market ContextCurrent Market ContextCum 2004 - Results Highlights



OverviewOverview




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Delivering Consumer Value

Brand Brand RelevanceRelevance

SuperiorSuperiorQualityQuality

StrategicStrategicPricingPricing

Ten Point Program to provide fuel

Driving the agendaDriving the agenda


• Surf Excel : Quick Wash , 50% water saving and effort

• Rin : “No Mud “

• Clinic Plus Milk Proteins : “5 in 1” hair health benefits

• Fair& Lovely : Change your destiny & Perfect Radiance

• Lifebuoy : Family safe from germs

• Close UP : Stronger, Whiter Teeth & Fresher Breath

• BrookeBond : Master Brand

• Lipton Ice : Natural Vitality

Continuous Innovation Stream across all Brands

Brand RelevanceBrand Relevance

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Morgan Stanley Asia Pacific Summit November , 2004Over 90 Mn $ invested

Superior QualitySuperior Quality


Rs 5

Rs 5Rs 10Rs 20Rs 40

Rs 4 Rs 5 Rs 5

Rs 0.50

Rs 5

Rs.5 Rs 25 Rs 2, Rs 4.50

Rs.1.50 Rs.1 Rs.5

Rs 5& 2

Strategic PricingStrategic Pricing

Rs 10 Rs 2

•Increasing Accessibility : Lower price points•Driving Affordability : Strategic Price Reductions

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• India is a base for

• 1 out of 4 Unilever Global

Research Centers

• 5 Global Innovation Centers

• >100 Scientists

Technology FocusTechnology Focus


WholesaleWholesale

Retail TradeRetail Trade

MT & SSTMT & SST

Mass retailMass retail

WholesaleWholesale

CSDCSD

RuralRural

Go as 'one'Go as 'one'

PC specificPC specific

Concern approach toConcern approach toderive critical massderive critical mass

Customer Focussed Sales OrganisationCustomer Focussed Sales Organisation

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Developing New ChannelsDeveloping New Channels

“Out of Home”

“Ayush Therapy Centers”“Lakme Beauty Salons”


• Product Range– Lever home range– Male grooming– Oral Care– Ayurveda– Personal Wash– Foods

• Reach - 1400 towns (Largest in India)• Consultant base - 330,000

Direct SellingDirect Selling

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•Challenges in Rural Markets– Accessibility– Viability– Media Dark

•Rural selling through SHG’s– Benefits

– Improving product reach– Facilitating Brand-Communication

– Extended into 12 major states– Over 30,000 villages covered– Touching 30 mn rural lives– Plans to cover 1,00,000 villages

– Touching 100 mn rural lives.

Rural Marketing - Project ShaktiRural Marketing - Project Shakti


In SummaryIn Summary

•Big Opportunity to grow Penetration & Consumption

• Strong Capabilities of HLL

• Powerful Brands

• Robust Business Capabilities

• Management Talent

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